Vendor take-back mortgages surge as traditional lending tightens

Seller-financed deals—specifically vendor take-back (VTB) mortgages—aren’t just surviving in Canadian real estate. They’re booming.

According to CoStar Canada, VTB transaction volume surged from $767 million in 2021 to $3.5 billion by the end of 2023, marking a nearly fivefold increase in just two years. This isn’t a fringe trend. It’s a fast-maturing part of the financing landscape, especially for private sales and deals that fall outside conventional lending criteria.

A VTB mortgage is when a seller loans a portion of the purchase price to the buyer, typically secured against the home. It fills the gap when traditional lending comes up short—and increasingly, it’s doing just that.

Why the spike?

Mortgage lending is tightening. Banks remain cautious, with federally regulated lenders reducing new originations by more than 17% year-over-year as of Q4 2024 (Office of the Superintendent of Financial Institutions, 2024).

At the same time, private lending in Ontario surged to a record 14.3% of total mortgage volume, the highest share in over a decade (Teranet, Q1 2025). That shift reflects a market in flux, where buyers, especially investors, are turning to more flexible alternatives like VTBs to close financing gaps.

On the other side of the transaction, you’ve got mortgage-free sellers—especially retirees and condo owners—sitting on valuable equity with no clear plan for it. These are often sophisticated property owners with no immediate need for a lump-sum cash payout. Offering a first or second-position VTB mortgage can generate fixed income at rates often exceeding 7%, with the home itself as security.

It’s a win-win scenario. The buyer closes without needing to meet stringent bank underwriting. The seller earns monthly interest income, often while deferring capital gains until a future date. And in most cases, a lawyer or title company can manage the paperwork with no added risk to the Realtor.

For Realtors, VTBs can mean the difference between a stalled listing and a closed transaction, especially in today’s unpredictable lending climate.

Despite this, Realtors remain hesitant—largely due to a lack of familiarity with the process and concerns about complexity or liability. But modern tools like Title Trust (a Toronto-based VTB transaction platform I founded) now handle all of the paperwork, verification, and disbursements through the seller’s own lawyer. It’s turn-key.

Realtors don’t need to advise on VTBs. They just need to know when a deal might benefit from one—and who to call when it does.

VTBs won’t work for every deal. But in a market increasingly reliant on non-bank solutions—private lenders now account for up to 15% of new Ontario mortgages, according to CMHC and industry estimates—it’s a tool every Realtor should at least be conversant in. Especially as condo values stagnate and listings pile up.

The resurgence of VTBs isn’t just noise—it’s a signal. And the savviest Realtors and sellers are already tuned in.

Takeaways for Realtors:

• Know when to flag a potential fit: VTBs are often ideal when the seller is mortgage-free, not reliant on full cash proceeds, or willing to offer flexible terms to close a stalled deal. They’re especially relevant in private sales, slow-moving condos, or investor-heavy transactions.
• Partner, don’t paper: You’re not expected to draft VTB terms or provide legal advice. Simply connecting your client with a lawyer or a VTB facilitator like Title Trust can keep the deal moving.
• Frame it as a strategic option, not a recommendation: You don’t need to pitch or sell the VTB. You can simply say: “Some sellers in similar situations have structured part of the deal this way to help close faster or generate income—if you’re curious, I can put you in touch with someone.”
• Highlight the potential market advantage: Offering a VTB can expand the buyer pool, help a property sell faster, and improve chances of getting full asking price—especially in a high-rate, low-qualification environment.